MCA’s KYC Drive: 18 lakh may be dummy directors

In the mega KYC drive for directors, undertaken by the ministry of corporate affairs, to cleanse the corporate sector and update its registry, the actual number of directors likely to be registered is estimated at 15 lakh against the total 33 lakh.

MCA’s KYC Drive: 18 lakh may be dummy directors

In the mega KYC drive for directors, undertaken by the ministry of corporate affairs, to cleanse the corporate sector and update its registry, the actual number of directors likely to be registered is estimated at 15 lakh against the total 33 lakh. The rest may actually turn out to be dummy directors, a senior government official has said. “At least, the basic credentials of the individual definitely needs to be verified. We will get to know the actual ones and get the basic information of the actual directors,” the official said.

In the drive, the company directors needs to give passport, PAN number and contact details. All of this information will have to be updated annually by the company secretary or chartered accountant at the time of filing annual financial statements. Besides this, there will be another form for the physical address of the company, which again will have to be updated annually by the company secretary. This is being done to crack down on the creation of new shell companies.

The official added that the government aims to rid the corporate sector of shell companies and bogus directors as it has been observed that rogue businessmen often designate their household helps, drivers or gardeners as board members. Often these individuals do not even know that they are directors on boards of companies promoted by employers and details come to light only when action is initiated against the company or its owners. Certificate requirement from a CA or CS will ensure that director’s credentials are verified and the board member knows about his or her legal status.

“A director is a person who is getting license to be on 20 companies (limit prescribed under the law). Why should we not know the bonafides of the person,” the official said.

“We are looking at nipping it in the bud. We are taking steps so that a shell company cannot exist,” he added.

To check tax evasion and prevent money laundering especially in the wake of demonetisation, the government had constituted a task force last year under the chairmanship of the revenue and the finance secretary Hasmukh Adhia and the corporate affairs secretary Injeti Srinivas.

The ministry of corporate affairs has already struck off over 2.26 lakh companies in previous financial year for non-filing of financial statements or annual returns for a continuous period of 2 years or more. Also, over 3.09 lakh directors were disqualified for non-filing of financial statements or annual returns for preceding 3 financial years (2013-14, 2014-15 and 2015-16).

The task force has compiled a database of shell companies by the Serious Fraud Investigation Office. The authorities have frozen the accounts of those shell companies which have been removed from the list and their directors have been restricted from accessing the bank accounts of these companies, the government had said.